The outstanding balance of a debt eligible for repayment rescheduling must either remain current or be overdue by no more than 10 days from its payment due date or repayment term. Struggling borrowers (corp. and indv.) may benefit from debt rescheduling while retaining their current debt classification.
Debt repayment rescheduling and the maintenance of debt classifications for customers were implemented from April 24, 2023 and remained effective until the end of June 30, 2024.
Circular No. 02 gives credit institutions the authority to assess and classify debts. However, the requirement to determine whether borrowers can feasibly meet their debt obligations during the restructured repayment period poses a challenge for credit institutions in implementation and assessment.
The State Bank of Vietnam has issued Circular No. 02/2023/TT-NHNN, providing for debt repayment rescheduling and the maintenance of debt classifications by credit institutions and foreign bank branches in order to support customers facing difficulties.
Accordingly, the Circular applies to customers experiencing difficulties in production and business activities, as well as customers facing difficulties in repaying loans taken out for living or consumer purposes.
CONDITIONS FOR DEBT REPAYMENT RESCHEDULING
Based on customers’ requests and their own financial capacity, credit institutions and foreign bank branches may consider and decide to reschedule repayment terms for the outstanding principal and/or interest of debts, including debts within the scope of the Government’s Decree No. 55/2015/ND-CP dated June 9, 2015 on credit policies for agricultural and rural development, as amended and supplemented, provided that the following conditions are met.
First, the outstanding principal balance must have arisen before Circular No. 02/2023/TT-NHNN took effect on April 24, 2023, and must arise from lending or financial leasing activities.
Second, principal and/or interest repayment obligations must fall due during the period from the effective date of the Circular through June 30, 2024.
Third, the outstanding balance of the debt subject to repayment rescheduling must remain current or be overdue by no more than 10 days from the payment due date or repayment term under the contract or agreement.
Fourth, the credit institution must assess that the customer is unable to repay principal and/or interest on schedule under the contract or agreement due to a decrease in revenue or income compared with the revenue or income anticipated in the principal and/or interest repayment plan under that contract or agreement.
Fifth, the credit institution must assess that the customer is capable of fully repaying principal and/or interest within the restructured repayment period.
Sixth, credit institutions and foreign bank branches may not reschedule repayment terms for debts that violate legal provisions.
Seventh, the rescheduled repayment period, including any debt extension, must be determined based on the customer’s degree of difficulty and may not exceed 12 months from the due date of the outstanding balance subject to repayment rescheduling.
RULES ON MAINTAINING DEBT CLASSIFICATIONS
Credit institutions and foreign bank branches may maintain the debt classification of debts whose repayment terms are restructured under this Circular at the same classification assigned at the latest point before the restructuring. Such classification is determined in accordance with the Governor of the State Bank of Vietnam’s regulations on asset classification, provisioning levels and methods, and the use of provisions to address risks in the operations of credit institutions and foreign bank branches. Debt repayment rescheduling and the maintenance of debt classifications for customers were implemented from April 24, 2023 and remained effective until the end of June 30, 2024.
For debts that remain current under their restructured repayment terms after being rescheduled and retaining their debt classification pursuant to Clause 1, Article 5 of Circular No. 02/2023/TT-NHNN, credit institutions and foreign bank branches are not required to apply the adjustment principle or reclassify them into a higher-risk debt group under the Governor of the State Bank of Vietnam’s regulations on asset classification, provisioning levels and methods, and the use of provisions to address risks in their operations.
Where a debt becomes overdue under its restructured repayment term after its repayment term has been rescheduled and its debt classification maintained pursuant to Clause 1, Article 5 of Circular No. 02/2023/TT-NHNN, and the credit institution does not further reschedule the repayment term in accordance with this Circular, the credit institution or foreign bank branch must classify the debt in accordance with the Governor of the State Bank of Vietnam’s regulations. For interest receivable on restructured debts that retain a standard debt classification (Group 1) under this Circular, from the date of restructuring, credit institutions and foreign bank branches are not required to recognize such interest as income on an accrual basis. Instead, it must be monitored off-balance sheet for collection and recognized as income only when collected, in accordance with applicable law and the financial regime for credit institutions and foreign bank branches.
Source: SBV, VnEconomy
